Bloomberg News

Australian Dollar Advances Amid Stock Gains, Bets on BOJ

November 19, 2012

The Australian dollar rose against most of its major peers after President Barack Obama expressed confidence that the U.S. can avoid the so-called fiscal cliff, boosting stocks and buoying demand for higher-yielding assets.

The so-called Aussie reached its strongest level in more than six months against the yen as the Bank of Japan (8301) meets today and tomorrow with political pressure mounting for more monetary stimulus. New Zealand’s dollar, known as the kiwi, maintained an advance after data showed its services industry expanded at the fastest pace in almost five years.

“The Australian and New Zealand dollars are being bought as risk assets, so they tend to be correlated with stock moves,” said Hideki Shibata, a senior strategist for rates and currencies at Tokai Tokyo Research Center Co. “Amid the broader sell-off of the yen, the Aussie and kiwi are being chosen as higher-yielding currencies.”

Australia’s dollar climbed 0.3 percent to $1.0369 as of 5:35 p.m. in Sydney. It rose 0.3 percent to 84.31 yen after earlier touching 84.51, a level unseen since April 27. The New Zealand dollar traded at 81.34 U.S. cents after gaining 0.4 percent to 81.27 on Nov. 16. It fetched 66.13 yen from 66.08.

The MSCI Asia Pacific Index (MXAP) of shares rose 0.9 percent.

Obama said in Bangkok yesterday that he is “confident” that the U.S. can get its fiscal situation dealt with. Before he left for Asia, he began a new round of deficit-reduction talks with top Republicans and Democrats to avoid the combination of $607 billion in automatic tax increases and spending cuts, known as the fiscal cliff, that threatens to throw the country into a recession next year.

Australia’s Bonds

Australia’s bonds fell, pushing the yield on the benchmark 10-year note up by six basis points, or 0.06 percentage point, to 3.09 percent. The rate declined to a one-month low of 3.02 percent on Nov. 15.

Japan’s political leaders are preparing for elections on Dec. 16 following last week’s dissolution of the lower house of parliament. Shinzo Abe, the opposition leader and an advocate of more aggressive monetary easing, has an approval rating of 37 percent, compared with 25 percent for incumbent Yoshihiko Noda, the Nikkei newspaper said, citing a survey taken between Nov. 16 and 18.

Bank of New Zealand and Business New Zealand said today that their Performance of Services Index for the nation jumped to 57.4 in October, the highest since November 2007, from 49.9 in September. A reading above 50 indicates expansion.

Futures traders increased bets that the Australian dollar will strengthen, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 68,146 on Nov. 13, the most since Sept. 25, and up from 60,317 a week earlier.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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